2014 (7) TMI 647 - HC - Income Tax

Tribunal upholds penalty for incorrect MAT computation under Income Tax Act

M/s. Sri Gokulam Hotels India P. Ltd. Versus The Assistant Commissioner of Income Tax

The Tribunal upheld the penalty under Section 271(1)(c) of the Income Tax Act for the appellant's failure to properly report the Minimum Alternate Tax ... Penalty u/s 271(1)(c) of the Act – Concealment of income and inaccurate particulars furnished - MAT computation u/s 115JB of the Act not reported – Held that:- The findings of the Tribunal were correct that in a case of 'nil' return, without complying with the provisions of Section 115 JB of the Income Tax Act, where the assessee is liable to pay MAT and the non-compliance there of results in imposition of penalty in terms of Section 271(1)(c) of the Income Tax Act, is correct - only on account of the AO's endeavour, the MAT liability came to be noticed - there was a clear case of the assessee failing to furnish particulars necessary for the assessment and the case of the department that the assessee has furnished inaccurate particulars for the purpose of determining the tax u/s 115 JB stands established - penalty has to be levied as per the provisions of Section 271(1)(c) of the Act and the AO was justified in imposing penalty – thus, no substantial question of law arises for consideration – Decided against Assessee. Issues:1. Interpretation of Section 271(1)(c) - Penalty for not reporting Minimum Alternate Tax computation under Section 115 JB of the Act.2. Application of legal discretion in favor of the appellant for not reporting MAT computation in the original return of income.Analysis:Issue 1:The case involves the imposition of a penalty under Section 271(1)(c) of the Income Tax Act for the failure to report the Minimum Alternate Tax (MAT) computation under Section 115 JB. The Assessing Officer found that the assessee, engaged in a hotel business, had not computed the book profit and MAT payable as required by law. The dispute arose due to the interpretation of what constitutes the eligible amount for set off while computing the book profit under Section 115 JB. The Assessing Officer determined that the assessee had not reported the accurate particulars of income, leading to the initiation of penalty proceedings.Issue 2:The second issue pertains to the exercise of legal discretion in favor of the appellant for not reporting the MAT computation in the original return of income. The Commissioner of Income Tax (Appeals) accepted the appellant's plea, emphasizing the difference in interpretation regarding the eligible amount for set off under Section 115 JB. The appellant argued that there was no liability under Section 115 JB due to a variance in the interpretation of the set-off amount. The Commissioner held that the penalty under Section 271(1)(c) should be deleted as the discrepancy arose from the interpretation of the law.Tribunal's Decision:The Income Tax Appellate Tribunal partly allowed the appeal, stating that the assessee had failed to make a proper computation of book profit under Section 115 JB while filing the return of income. The Tribunal found that the Assessing Officer's intervention was necessary to identify the MAT liability, indicating a failure on the part of the assessee to provide necessary particulars for assessment. Consequently, the Tribunal upheld the imposition of the penalty under Section 271(1)(c) by the Assessing Officer, emphasizing the appellant's non-compliance with the provisions of Section 115 JB.In conclusion, the Tribunal affirmed the penalty under Section 271(1)(c) as justified in the circumstances, dismissing the Tax Case (Appeal) with no substantial question of law for consideration. The decision highlighted the importance of complying with tax provisions, especially regarding MAT computation, to avoid penalties under the Income Tax Act.